Job security in manufacturing: Why all the negativity?

By the time many of you read this, votes will have been cast, the campaigning finished, and we can all enjoy a few weeks before the cacophony starts again.

Politicians have become truly ridiculous, and their cacophony reflects the cacophony of the people who elect them. Sure, you can blame the media, gerrymandering, or a host of other factors for our political polarization, but there’s something else going on that doesn’t sit right with most of us.

What is this, exactly? A lot of it probably is about jobs. Still, the labor market is tight now, at just around 5 percent unemployment. And the “U6,” the Bureau of Labor Statistics’ more comprehensive measure of unemployment that includes discouraged, underemployed, and marginal workers, was at 9.3 percent in September—a little higher than the 8 percent rates we saw prior to the Great Recession, but not out of the ballpark. Workers are benefiting from wage growth too. In October the Treasury Department reported that the annual wage increase actually grew to about 5 percent from October 2015—up significantly from March 2016, when it was less than 3 percent. Considering all this good news, why all the negativity?

Two other factors may play a role here. First, if someone loses a job now, there’s a good chance it will take a very long time to find another one. Almost a quarter of the unemployed have been looking for a job for more than six months. If you lose your job today, it still feels like we’re in a big recession.

Second, more companies are failing. New research from the Tuck School of Business at Dartmouth analyzed almost 30,000 publicly traded firms and found that the odds of those companies surviving the next five years has dropped significantly. Before the 1970s, that rate was at 92 percent, and by the early 2000s that rate had dropped to 63 percent.

The researchers attributed much of this to technological innovation, which can make a company succeed and grow quickly; but if the market goes south or structurally changes—that is, a certain product or service simply is no longer needed—then companies can fail quickly too. The authors noted that the companies they studied are rather large, and that small companies in general have always had high failure rates.

These small shops are where many metal fabrication workers get their start; historically, many are then lured away to a larger manufacturer. Not only were those larger firms more established, they often offered better pay and benefits.

According to the “2016 Salary/Wage & Benefit Survey” from the Fabricators & Manufacturers Association International^®, this may not be the case anymore, at least for some. For the majority of positions, a bigger company doesn’t necessarily mean more pay. In fact, for some positions, accepting a job at a smaller company may actually lead to better pay.

According to the survey, the average salary for a code-certified welder was more than $49,000 for companies with less than $10 million in sales; at firms with more than $20 million in sales, the average reported salary was $44,318.

What about entry-level welders? Here the survey did show that companies with more than $50 million in revenue paid welders slightly more, averaging a little more than $33,000, versus about $31,000 at shops with less than $10 million in sales.

But after a welder gains several years of experience, that difference goes away. In fact, the survey says that manufacturers with $20 million to $50 million in revenue actually pay experienced welders a little more than everyone else, with an average salary of more than $42,000.

Note that the range of pay for experienced welders is wide, with some firms reporting salaries as high as $70,000. Which facilities reported such high pay? It wasn’t the big firms but instead the smaller shops, $10 million in revenue and less.

To be sure, for front-office and executive positions, larger companies usually offer more money. But when it comes to salaries for people on the shop floor, pay doesn’t seem to be very different between large and small companies. This is good news for metal fabricators, the vast majority of which are small companies trying to attract talent.

But from the worker’s perspective, it may indicate a new kind of career path. Generations ago, a welder, press brake operator, or any other skilled technician might get a job at a job shop, then jump to a larger organization, spend his career on the factory floor, and retire with a pension.

Nowadays more people may climb the career ladder by jumping from one small company to the next, many of which offer better pay than jobs at larger factories. Sure, small companies do have a high risk of failure, but so too do many larger companies.

This all may contribute to the anxiety we heard about during this ridiculously protracted election cycle. Unemployment is low, but people feel less secure. The good news is that, for talented technicians lucky enough to be able to move to where the jobs are (not a given these days), good-paying opportunities in metal fabrication abound.

Moreover, research has shown that people more engaged with their work—no matter what that work is—are usually happier. Amy Wrzesniewski at Yale University has defined such a worker as someone who identifies his or her job as a “calling.”

This would probably apply to Jerry Miller, chief operating officer at Elizabethtown, Pa.-based Bass Mechanical who is also a certified welding educator and inspector (CWI and CWE). “I really love my trade; I love what I do,” he told me in October. When I talk to people in this business, I actually hear this quite often.

Still, no matter how positive and engaged they are, people care about job security, and the reality is that in the modern economy, the risk of business failure is higher. But an engaged person, one who has identified his or her professional calling, faces such risk with an open mind and good attitude—two attributes that have been severely lacking this election season.

To obtain a complete copy of FMA’s “2016 Wage/Salary & Benefit Survey,” visit www.fmanet.org/store, or call 888-394-4362.